You guys make smart decisions, and 67% percent of you say that the R35 is the one you’d go for. Speaking of smart, I got a ton (more than any other kind) of emails about new car buying advice. Maybe I take my knowledge for granted, so let me share some sneaky things a dealer might try to do, using a new BMW M2 lease as an example.
Small numbers, big game
MWS is of course about how a car makes you feel, but if you buy a car that puts you in a bad spot financially, it doesn’t matter how good it is. You’re going to hate it.
Now normally, a thing like a BMW M car would never be in a dealer ad. They barely keep them on the lot, are never subjected to big discounts, and are usually ordered months in advance. Which is why, when I saw this ad at a local BMW dealer (I’m not telling you which one), it caught my eye.
Wow. A brand new M2 for $849 per month. That sounds like a really good deal.
It isn’t.
Don’t be afraid though, because now you have Mike on your side.
Step 1 – What’s the MSRP?
You might go into a dealer concerned only about the monthly payment. This is wrong. Lease or buy, the price you pay for the car is the most important part of the process.
I did some digging, and the M2 Coupe this dealer has listed has the following options:
- Heated steering wheel
- M Shadowline Lights
- Lighting Package
- Live Cockpit Pro
- Eight-speed auto (a zero-cost option)
- Total MSRP listed: $67,490
The funny thing is, if I build the car on BMW’s site, it comes out to $68,275, so I’d build the car with the salesman to make sure everything on the car checks out.
Now, the only number you should be concerned with is that price. Ask for a percentage off. 5% is good. 10% is better (you won’t get it but you need to ask for more so they counter).
This dealer has no discount listed, so we’ll play along with that $67k price.
Step 2 – Watch the fees on this BMW M2 lease
Added to the MSRP right away is a document fee of $899. Dealers charge this for registration and other items, and though it can vary a bit by dealer, it’s usually pretty consistent.
Here’s where they get you. To achieve this $849 monthly payment, you must put down $5,995 dollars and pay the doc fee separately. You might as well light the money on fire, because that’s what it amounts to on a lease. Do not put anything down.
Why? Because when it’s time to get rid of the car, you have nothing to show for it. Get the monthly payment you want by lowering the MSRP, not handing them a check.
Up next, the tax. In New Jersey we pay 6.625% (what an awesome state), which is an additional $4,700 dollars. Obviously you can’t avoid this, though you can roll it into the lease payment if needed.
If you’re trading a car in, you should be able to use it as a subtraction for the price of the car. If your trade-in is worth $10,000, the price of the M2 is now $57,490, and your tax is reduced.
Next, check the mileage allowed: 7,500. This isn’t a McLaren! You’ll blow through that (22,500 miles), in two years if you drive it all the time. Getting more miles will cost more money.
Lastly, the fine print says “Must be loyal”. I’m very loyal, thank you. But in this context, they mean you’ve had a BMW before and now you’re getting another. Hope that’s true.
Now if you do all that, yes, you can get this BMW M2 lease for $849 per month. But…
Step 3 – Do the math
This part’s fun. Let’s go back to BMW’s site and build the same car for $68,275. We’ll use their “estimate payment” feature, and since the site’s lowest mileage allotment is 10,000 per year, we’ll use that as the example.
The payment comes to $1,095.80 per month for 36 months. That’s $246 per month more.
Remember that down payment they want from you? Let’s say you keep it in your pocket and use it to pay toward the extra. That means you have 24 months of the difference covered.
Hmm, we’re still coming up about $3,000 short. But remember the lower mileage limit? Make it 10k instead of 7,500, and suddenly we’re within a few bucks of what the dealer wants. The point here; YOU keep the down payment.
Tell you what, let’s try it other way. Using the same tool from BMW, we’ll actually put down the $6,000, and because we love to drive, let’s select 15,000 miles per year. Cost?
$965 per month.
Yup. For $100 more, you can actually drive the car and enjoy it.
Prepare yourself for battle at the car dealership
I pity the person that walks in expecting BMW to hand over the keys for $850 per month.
Oh sure, they’ll do it for you, after you hand them a check for $11,578.
My advice? Lower the MSRP, pay the taxes and doc fee up front, get more miles, and walk out of there with a new M2 (with money in your pocket), for a still-manageable monthly payment that makes more financial sense.
Oh, and one other thing…
If the deal doesn’t feel right for any reason, walk away. I promise, they will build you a BMW when you’re ready.
It might be their time, but it’s your money.
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